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Leopold Aschenbrenner OMR Hedge Fund Collapse

1:30:27 recording · EN · 2 speakers

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Brief overview

A 450% AI-rally hedge fund collapsed on leverage, while cloud earnings and falling model prices boomed.

  1. Leverage, not insight, ended the runA four- to fivefold lever turned 20-30% drawdowns in chip and energy names into margin calls that liquidated the whole public book.
  2. Liquidity itself is the product Citadel sellsCitadel took the portfolio at a 5 to 10 percent discount and the stocks rose 8 to 12 percent the next day once the selling pressure was gone.
  3. AI is the first software that gets cheaper fastLuna at 80% cheaper and Terra at 20% cheaper fit the pattern that last year's performance costs a tenth today, unlike SaaS pricing which never really fell.
Executive Summary AI
  • The episode picks up the OMR podcast discussion of Leopold Aschenbrenner, the Situational Awareness author who left school at 15, graduated top of his class at Columbia at 19, researched with Nobel laureate Josef Stieglitz, worked at FTX's charity arm and then OpenAI before starting his own hedge fund.1:52
  • His fund started with 225 million from LPs including the Collison twins, Daniel Gross and Ned Friedman, ran an early long bet on the AI supply chain at roughly four- to fivefold leverage, and was reported at up to 45 billion under management within about two years.3:10
  • Then margin calls forced him to liquidate every public-market position at once after names such as Sandys fell almost 45%, Nebius about minus 30%, CoreWeave minus 25% and Core Scientific minus 15, with the hosts noting a 20% drop on five-times leverage wipes out all the collateral.5:09
  • Ken Griffin's Citadel, with 71 billion under management, bought the book out in a block trade at a 5 to 10 percent discount and saw those same stocks jump 8 to 12 percent the next day, while investors are probably still in the plus after a 450 percent year.11:31
  • On the model side, Sam Altman is announcing a price offensive with the 5.6 family, where Luna is said to be 80% cheaper and Terra 20% cheaper, and the earnings round shows Microsoft adding around 500 billion in market value in a day, Meta down over 10%, and AWS accelerating to 37% growth at a 42 billion quarter with a 40% operating margin.20:48
Key Quote
“As I said, a 20% loss is enough to erase 100% of your money.”
— Philipp Klöckner7:07
Key Quote
“What doesn't work is to saw a AI strategy in such an old, sclerotic, crumbled organization mediator.”
— Philipp Klöckner28:35
Key Quote
“So 10 billion a month is still spent on AI.”
— Philipp Klöckner29:49